Have a mobile app? Wondering if advertising
can help you make money from that app? Here are eight must-know tips to
help you turn mobile app inventory into dollars.
1. It takes customers to make money
While
this is a piece about monetizing apps, the amount of money you can
generate from an app is highly dependent upon the number of users you
have. Once apps achieve popularity, their success spirals. In order to
reach critical user adoption levels, engage in user acquisition best
practices, from cross-promotion to viral distribution, and from PR to
paid in-app advertising. Try multiple channels to see what works for
you, and stick to vendors who allow you to pay based on the performance
metrics that are relevant for your unique business needs. For example,
don’t pay for clicks if what you really care about is installs.
2. Know your customers – and their value
Not
all customers are created equal. Know the lifetime value of your
customers by the channels in which they were acquired. For example,
let’s say you can acquire a “high value” customer – say someone worth $6
in lifetime value — for an acquisition cost of $3, and let’s say you
can acquire a “low value” user worth $2 in lifetime value for an
acquisition cost of $1. Don’t think that pursuing one customer or the
other is an either/or decision. You make $3 in profit from the “high
value” customer and $1 in profit from the “low value customer.” Both
sets of customers are profitable, so pursue additional acquisition of
BOTH types.
3. Averages lie
Whatever
you do, do not fall into the trap of averaging your customer
acquisition costs — nor your user values. In the above scenario, if you
average the value of your customers, you might attempt to pay $2 for
customers worth “an average of $4.” At that price you probably couldn’t
get the $6 high value customer because your bid would be too low to be
competitive and you’d be spending $2 to acquire a customer worth exactly
that – with no margin leftover for you. Needless to say, this is not a
profitable path for user growth.
4. Free is often best – but not always
What
you charge for an app should be based largely on how users engage with
it. For example, if people use your apps just a few times, an
ad-supported model probably doesn’t make sense, as you’ll earn just
pennies per user. It makes more sense to charge 99 cents, $3.99 or
another small fee up-front. Even though sales at the paid price will be a
fraction of the free, ad-supported version, the total revenues are
likely to be higher. However, if you have an app that is likely to be
used many times – and this is the majority of apps – then free is
probably the best option for you. And of course, free trials and
freemium options are also great avenues for getting users hooked on your
services. After that happens, there is a much higher chance that
they’ll actually spend money on your app. A recent piece
by Infoworld does a good job of discussing this user engagement model.
5. Don’t play favorites with money
Too
many app developers get caught up in the decision of whether to use
advertising or virtual currency to monetize their free apps. Stop
fretting about which is better. When it comes to money, all money is
good. Try both options – many of the top app developers use both of
these channels and more. Fortunately, implementing advertising in your
app can be self-serve and almost instantaneous. The risk is incredibly
low to try it out and see if it works for you.
6. Don’t play favorites with partners, either
Ease
of setup is not a license to skip due diligence in monetization
partners. You should do your research, select a number of potential
monetization partners — and try out all of them. Consider this app
monetization speed dating. Test out several partners until you find the
one or ones that monetize best for you.
7. It takes two to tango
Don’t
expect your monetization partner to do all of the work. You know your
app better than anyone. Think critically about logical places and
transition times for advertising. If you develop a game, consider
placing ads at natural transition points between levels and/or at the
end of a game. Think about when your users may be most willing to engage
with ads, and place advertising accordingly. The result will be both a
better experience for your users AND increased revenue for you.
8. Analytics reign supreme
It’s
absolutely worthwhile to spend the time and resources required to
invest in solid analytics. Invest in internal analytics in order to
truly understand user values, customer attribution models, and
monetization payouts, and use the myriad of external tools available,
from App Annie to Distimo, to help you make smart decisions about
markets to pursue, platforms to prioritize, and other critical strategic
decisions to make.
Given
the explosion of smartphone adoption rates and app usage trends, it’s
an exciting time to be a mobile app developer. Make the most of it!
